What is the Mortgage Process?
What is the mortgage process? Once you've applied for a mortgage, three stages follow before you are granted your loan. These are:
Get a Mortgage agreement in principle
Book your Mortgage Valuation
Receive your Mortgage Offer
Step 1 - Applying for a mortgage in principle?
A Mortgage in Principle is when a lender tells you that it is prepared to lend you, in principle, a defined sum, towards buying a property. It is 'in principle' because the lender then has to value any property which you have an offer accepted on to decide whether the home is worth the money that it has in principle offered you money towards. It is dependent on your household income multiples as well as affordability based on Mortgage Market Review criteria.
Step 2 - What is a Mortgage Valuation?
You must pay for your mortgage valuation with your mortgage lender (Read more about the Mortgage Valuation), in which your lender sends a surveyor to the property to inspect it to see if its value is consistent with the sum the lender is prepared to offer you to buy it.
If the lender decides, after the surveyor has delivered to it their valuation report, that the property is not worth the money or it has defects, it may either refuse to lend you the money on that property or set conditions which you must fulfil if they are to lend. It might, for example, stipulate that you have to carry out, at your expense, a Pre-Purchase Survey to examine an issue it has found. Issues can include, for example, subsidence, radon gas or drainage problems. Once again, if this survey indicates many problems, the lender can refuse to lend on the property.
Once your Mortgage Valuation survey has taken place and the surveyor has returned their report to the lender, the lender either agrees to grant you a mortgage, tells you that it will grant it under certain conditions or refuses to grant you the loan for that property, in which case you can either appeal or look for a fresh home to buy.
Step 3 - Mortgage Offer
If a lender is satisfied with the Mortgage Valuation report, it then tells you and you receive your Mortgage Offer. This is a highly important stage which you must reach before you can exchange contracts with the vendor. Unless you are a cash buyer, a seller will pull out of dealing with you if you can't prove that you will be lent enough cash from a lender to cover the agreed purchase price.
The mortgage offer is unlikely to be rescinded unless it is found out through the conveyancing process that there is a legal issue or if any of the information provided to the mortgage lender is incorrect. The solicitor acts for the mortgage lender and satisfies their requirements which are shown in the mortgage offer and also the Mortgage Lender's Handbook which can be found on the Council for Mortgage Lenders' website.
Mortgage lenders require you to buy property searches before they'll agree to give you a mortgage. What searches they require are set out in the Council for Mortgage Lender's Handbook. The minimum requirement is the Local Authority search, however they may also require the Environmental Search and Water & Drainage Search. You can read about all of the property searches here.